Special Report

Will Europe Convince World To Adopt Tough Green Standards?



In 2019, European Commission President Ursula von der Leyen boldly declared “Europe’s man on the moon” moment, as she announced the continent’s plans to be carbon neutral by 2050.

The European Green New Deal would, among other bold proposals, halve Europe’s greenhouse gas emissions by 2030, decarbonize the energy sector, and influence environmental standards internationally by raising Europe’s own.

But the European Union produces only 10% of the world’s greenhouse gas emissions, so having what is widely considered the world’s most ambitious climate change policy plan isn’t enough to fix the problem.

And so to realize its green ambitions, the EU intends to reach beyond its borders, to bring along countries including the United States and the globe’s No. 1 polluter, China.

The challenge is determining who can be coaxed to come along for the ride, and what levers Europe can pull – such as a carbon tax on imported goods – to bring them on its turbulent journey towards a greener future.

“Stringent climate policy will create winners and losers in society,” says Sonja Peterson, a climate economist at the Kiel Institute for the World Economy.

“Industries will have to change, new fields of work will be created. But, ultimately, EU climate policy is of little help alone. It will be very important to get the U.S. and China on board to reach temperature targets [of the Paris accord]. Though, I think it can be helpful to show how decarbonization can work in Europe first.”

Europe’s leadership intends to leave no person behind as it attempts to overhaul nearly every sector, from transportation to agriculture to energy, via regulation and legislation.

“The biggest challenge within the next couple of years will be to design this transformation in a way that brings people along,” says Vicki Duscha, business climate policy analyst at Fraunhofer Institute for Systems and Innovation Research.

“We have the goal to take everyone with us. If we do it right, there will be new jobs created. This transformation won’t be possible without the people.”

Ironically, the COVID-19 pandemic has presented an opportunity. Not only has the world-at-a-standstill triggered in a sharp reduction in carbon emissions, but it has allowed the

EU to roll out a stimulus package in which roughly €275 billion ($335 billion) has been dedicated to a recovery effort that will also combat the effects of climate change.

“In principle, I think Europe’s goals are reachable,” says Dr. Peterson of the Kiel Institute.

“Many studies show, with which mixture of technologies, we can become completely carbon-neutral. But in reality, this is a huge challenge and we’re far from the goal. The steps that are missing are much more demanding than what’s already been achieved.”

The path is clear in certain industries such as energy, but more challenging in emissions-heavy sectors such as agriculture and transportation.

“Liquid fuels seem to be the best way to decarbonize transportation. Yet, we have ideas about a climate-neutral liquid gas, but we’re far away from generating the amounts necessary,” says Dr. Duscha.

“The same holds for agriculture; there are only a handful of technological possibilities to reduce methane, and we’ll also have to change our dietary habits. That’s hard to address from a political point of view.”

And the transition could spark a public backlash as it starts to affect jobs. It already is at the world’s oldest Mercedes-Benz plant, in the Marienfelde region of Berlin.

European Commission President Ursula von der Leyen

This year, Daimler management announced plans to phase out combustion engine production there as the company turns toward electric motors.

The factory, which Daimler has run since 1902, might be downsized, prompting hundreds of workers to protest earlier this month.

“You can’t just stop using the internal combustion engine right away,” says Heike Fesinger, who, along with her husband, was marching on a cold, overcast day.

She started at the plant as a lathe operator 38 years ago, and is now a test-equipment instructor. “This factory shouldn’t be closed down just because some CEOs missed the boat for e-mobility. The transformation needs to go slower.”

Even if Europe convinces its own people to embrace the green path, it remains to be seen whether other countries will follow along.

The U.S. has a stated goal of becoming carbon neutral by 2050, while China this year announced plans to peak CO2 emissions in the year 2030, and aims to become carbon-neutral by 2060.

“The three biggest emitters are China, the U.S., and the EU, with everyone else trailing in their wake,” says Jeremy Shapiro, research director at the European Council on Foreign Relations.

“Any sort of three-way agreement with them would set the tone.” That might include, say, setting a standard for assessing the carbon content for exported industrial goods.

Yet the U.S. policy-making environment is incredibly polarized, and America is emerging from four years under a president who refused to

acknowledge climate science. Meanwhile China, for decades the world’s factory floor, can’t easily curb emissions in an economy still so reliant on a coal-powered industrial sector.

If other countries do not follow along, Europe may need to deploy its unmatched regulatory capability, and the mechanisms that spring from that, to increase its sovereignty and ability to act, say experts.

That includes a border carbon adjustment, which the EU intends to finalize in 2021.

Such an adjustment is most likely to take shape as a tax levied on imports into the EU, pegged to the amount of greenhouse gases emitted in their manufacture. This “carbon tax” is being discussed in part because international cooperation might fall short; it would attempt to subject international industry to the same terms of competition as those inside Europe.

Under such a scheme, Daimler would derive little benefit from shuttering an engine factory in high-regulation Germany,

moving production to a more-permissive China, and importing engines back into Europe. Simultaneously, such a tax would hamper foreign manufacturers from selling “dirty” products to Europe. In other words, a carbon tax helps level the playing field.

“Conceptually it makes a lot of sense,” says Mr. Shapiro of ECFR. “Because if you don’t do something like this, the carbon would essentially get exported abroad. But it’s a very, very difficult thing to implement.”

That’s not only because of the diplomatic tensions that would result, or the uncertainty around whether such a scheme would be compliant with World Trade Organization rules. There’s also the intricate logistics of determining the carbon content of an import. “It might require insight into six different countries’ supply chains before you even get to Europe,” says Mr. Shapiro.

Most exciting for the near term, say experts, is the industrial policy Europe would deploy in the race to develop green technologies. In certain sectors, including renewable energies, Europe has already shown the green choice can be low-cost enough to be profitable.

“That’s giving people money,” says Mr. Shapiro. “That’s always a bit easier to push through.”

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